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A federal judge in Syracuse, N.Y., has held that attorney billing statements, to the extent they reveal more than the identity of the client and the fee, are shielded under federal common law by the attorney-client privilege. U.S. Magistrate Judge Gary L. Sharpe’s opinion in an ongoing battle in upstate New York was by no means a given, as the federal rules are far less definitive than New York’s. Although the 1st and 9th U.S. Circuit Court of Appeals have declared that fee statements are privileged when they reveal details about the services provided, the 2nd Circuit has not directly confronted the question. Magistrate Judge Sharpe largely adopted the 1st and 9th Circuit positions, and held that billing records are shielded under federal common law. The case, Ehrich v. Binghamton City School District, 3:02-CV-62, arises from a motion by a Binghamton, N.Y., law firm to disqualify and sanction opposing counsel in a pending discrimination case. It involves a girl who sought to join the varsity golf team and whose parents initiated a pro se legal action, alleging discrimination, when they claim she was rejected. After U.S. District Judge Thomas J. McAvoy refused to allow the parents to represent their daughter, attorney Robert C. Kilmer filed notice of appearance on her behalf. Counsel for the school district, Paul J. Sweeney of Coughlin & Gerhart in Binghamton, then moved to disqualify and sanction Kilmer because he operates a business called Legal Expense Management, which had been hired by the school district to review legal bills and to suggest ways to reduce its legal expenses. Since Coughlin & Gerhart served as general counsel to the school district, Kilmer’s firm reviewed the firm’s billings, including those associated with this case. Before Kilmer became involved in the case, the plaintiff’s father had obtained through the Freedom of Information Law redacted legal bills submitted by Coughlin & Gerhart. At issue here was Kilmer’s access, if any, to unredacted and privileged legal communications. Coughlin & Gerhart asserted as a matter of “black letter law” that Kilmer had access to privileged communications, and therefore could not represent the plaintiff. Kilmer countered that there was nothing in the bills he reviewed that constituted legal advice. Both sides presumed that the answer to the privilege question is the same under New York state law and federal common law, and both sides were wrong, according to Judge Sharpe. STATE VERSUS FEDERAL LAW In New York, the court said, the attorney-client privilege is codified, and privileged material is statutorily exempt from disclosure. Additionally, state appellate courts have made clear that bills describing an attorney’s work are privileged, although retainer and fee agreements are not. On that standard, Sharpe said, the bills are privileged under state law. But he found the issue much more difficult under federal law. Sharpe cited several decisions where U.S. courts have seemingly eschewed a rigid rule; he found none in this circuit that specifically addresses billing records. “Although the federal rule is less definitive, the court concludes that attorney billing statements are subject to the attorney-client privilege to the extent that they reveal more than client identity and fee information,” he wrote. Sharpe said it is obvious that Kilmer’s firm had access to privileged information not only generally, but also about the Ehrich case. However, while he said the question of sanctions was “a close one,” the judge declined to impose a financial penalty on Kilmer. “It is inconceivable from a New York perspective that Kilmer could have disagreed with Coughlin & Gerhart observations that he had been privy to privileged communications while representing the school and was now undertaking to represent a client with adverse interests in a case where the communications were at the heart of a pendant state claim,” Sharpe wrote. “As a matter of New York law, Coughlin & Gerhart was correct when it observed that the privilege and conflict answer was a ‘matter of black letter law.’ Nonetheless, as should be clear from the breadth and scope of this opinion, the federal answer is anything but a matter of black letter law,” he wrote.

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